M/S. Sesame Foods Private Ltd. vs Union Of India & Others
2010 Latest Caselaw 569 Del

         IN THE HIGH COURT OF DELHI AT NEW DELHI



                             W.P.(C) No. 16559 of 2006

 M/S. SESAME FOODS PRIVATE LIMITED                  ..... Petitioner
                    Through: Mr. Arjun Mitra, Advocate.

                  versus


 UNION OF INDIA & ORS.                              ..... Respondents
                    Through: Mr. S.K. Dubey, Mr. Ritesh Kumar, Mr.
                    Akshay Singh, and Mr. Vanshdeep Dalmia,
                    Advocates for R-1, R-2 and R-5.
                    Mr. Abhishek Kumar, Advocate for R-7.
                    Mr. Satish Aggarwala with Ms. Hrishika Pandit,
                    Advocates for R-3 & R-4.

 CORAM:
 HON'BLE DR. JUSTICE S. MURALIDHAR

         1. Whether Reporters of local papers may be
            allowed to see the judgment?                       No
         2. To be referred to the Reporter or not?             Yes
         3. Whether the judgment should be reported in Digest? Yes

                               ORDER

02.02.2010

W.P.(C) No. 16559 of 2006 & CM Nos. 13554 of 2006 (for stay), 15654 of 2007 (for directions), 1059 of 2008 & 7583 of 2008

1. The Petitioner which is an export oriented unit („EOU‟) having its office at

Ansal Bhavan, Kasturba Gandhi Marg, New Delhi challenged the impugned

order dated 15th/16th February, 28th February, 19th April and 18th September

2006 issued by the Respondents seeking to recover a sum of Rs.3,22,91,926/-

stated to be the amount of duty drawback paid to it in excess.

2. In terms of a letter of permission dated 18th May 1999 the Petitioner was

approved for manufacture and export of sesame seeds in terms of the Export

and Import Policy („Exim Policy‟) for the period 2002-07. The Petitioner

states that its approval was up to 2011.

3. According to the Petitioner certain concessions are given to exporters

operating from the EOUs to enable them to compete at the international level.

Goods manufactured by the Petitioner, the raw material whereof is sourced

from the Domestic Tariff Area („DTA‟) are eligible to the benefit of duty

drawback. The Petitioner claims that it is entitled for refund/rebate of the

amount corresponding to the duties both customs and excise suffered or

leviable on the inputs that go into the manufacture of the exported products.

In particular, the Petitioner relies upon 6.12(a) of the Exim Policy which

provides that "supplies from the DTA to EOU will be regarded as "deemed

exports" and the DTA supplier shall be eligible for the relevant entitlements

under Chapter 8 of the Policy besides discharge of export obligation, if any,

on the supplier. Further, notwithstanding the above, the EOU units shall, on

production of a suitable disclaimer from the DTA supplier, "be eligible for

obtaining the entitlements specified in chapter 8 of the Policy." The said

clause further provides that for the purpose of claiming the deemed export

duty drawback, the EOU shall get Brand Rates fixed by the Development

Commissioner, wherever All Industry Rates of Drawback are not available."

4. The Petitioner made an application on 30th December 2003 to the

Respondent No.2, Director General of Foreign Trade („DGFT‟) for fixation of

the rate of duty drawback on "sesame seeds deemed export" under para 8.3(b)

of the EXIM Policy 2002-07. Clause 8.3(b) of the EXIM Policy provides that

the deemed exports draw back shall be eligible for deemed export duty

drawback. It is stated that on 25th May 2004 the Petitioner submitted the

original payment certificates and disclaimers for all the claims with the office

of the Deputy Commissioner, Noida Special Economic Zone („NSEZ‟),

Respondent No.3 herein. The bankers of the Petitioner i.e. State Bank of

India (SBI) are also stated to have sought clarifications from the NSEZ about

the status of the drawback claims made by the Petitioner by the letter dated 8 th

June 2004. By a letter dated 16th June 2004 the NSEZ raised queries regarding

the Petitioner‟s claims for deemed export duty drawback. The Petitioner was

asked to explain how the claims submitted by the Petitioner showed duty paid

as nil but duty was claimed at 30% and 20% of F.O.R.

5. On 16th June 2004 the Petitioner replied to the NSEZ taking the following

stand:

"(i) that the goods were neither directly imported by the Petitioner nor the same was a pre-requisite under the applicable policy;

(ii) that the duties claimed goods were sourced from DTA supplier and have been treated as deemed imports as per the applicable Exim and Foreign Trade Policy.

(iii) That the duties claimed were based on the duties chargeable based on duty confirmed by Federation of Indian Export Organisation (FIEO) vide their letter No. FIEO/EP. 10 (2)/04 dated 16-6-2004 (Annexure L).

(iv) That although the duty paid would be shown as Nil, the claims were based not on the actual import duty to be paid but on the deemed import price worked out for the purposes of parity for deemed imported goods to cater to the needs of EOU.

(v) The Petitioner was not required to submit any bill of entry/import invoice nor any duty paying documents as queried."

6. It is stated in para 15 of the writ petition that "since the Petitioner has

exported the sesame seeds therefore it had claimed the duty drawbacks in

respect of custom duty leviable on imports of sesame seeds." It is claimed

further that the Petitioner is "entitled for duty drawback of custom duty as

applicable under the custom tariff irrespective of whether the seeds were

sourced from actual import by paying import duty or the same were sourced

from the domestic market." The Petitioners claimed that they have already

been granted deemed export drawback by DGFT on high speed diesel

(„HSD‟) on the basis of custom duties leviable as per custom tariff Manual on

Free on Board („FOB‟) value of fuel. They sought similar grant of export

duty drawback in respect of the sesame seeds.

7. On the basis of the Petitioners representation the Development

Commissioner vide letter dated 4th October 2004 fixed the brand rate and the

amount of duty drawback at Rs.168.12 lakhs for the period 1 st October 2001

to 31st March 2002 (as against a sum of Rs.439.80 lakhs) which is claimed by

the Petitioner. Likewise for the period 1st April 2001 to 30th September 2001

the duty drawback was fixed at Rs.61.89 lakhs. For the period of April 2002

to September 2002 at Rs.39,76,077, October 2002 to March 2003

Rs.90,06,466/- and April 2004 to September 2004 at Rs.24,97,129. The

above amounts were paid to the Petitioner. Since the above settlements were

less than what was claimed by the Petitioner it made a representation on 17 th

January 2005. On 5th August 2005 the DGFT wrote to the Petitioner stating

that the matter had been considered by it in consultation with the Department

of Revenue Duty Drawbacks Directorate. The observations made by the

Central Board of Excise & Customs had also been considered. It was pointed

out that in order to qualify for „deemed export‟ the primary condition is that

the goods should be manufactured in India and that "in the instant case the

sesame seeds supplied by the DTA was not manufactured in India and was

imported." It was pointed out that the photocopy of the bill of entry was not

submitted by the Petitioner and, therefore, the incidence of duty could not be

established.

8. According to the Petitioner the definition of drawback did not mandate the

proof of duty incidence. However there was no dispute in so far as the selling

of goods in the international market. The Petitioner has made commitments to

the banks, financial institutions and importers on the basis of claims paid. It is

stated that on 15th/16th February 2006 a communication was received from the

DGFT, with reference to the Petitioner‟s representation dated 21 st December

2005 that "since payment of duty incidence has not been approved you are not

entitled to deemed export drawback." This was followed by a letter dated 28 th

February 2006 issued by the NSEZ asking the Petitioner to refund a sum of

Rs.3,22,91,926/- paid to it in excess as deemed export duty drawback. The

Petitioner was reminded that it had furnished a declaration/undertaking signed

by it granting "immediate refund of the amount of drawback obtained... in

excess and any amount/rate which may be re-determined by the Government

as a result of post verification." The Petitioner made a representation dated

2nd March 2006 which was rejected on 19th April 2006 by the DGFT. A

further representation dated 21st April 2006 was rejected by a letter dated 1st

May 2006 issued by the Joint Development Commissioner, NSEZ once again

raising a demand of Rs.3,22,91,926. This was reiterated by a further demand

to the same effect dated 18th September 2006.

9. On 28th September 2006 the Petitioner was again informed by the

Respondents that sesame seeds were not entitled to any duty drawback

benefits as duty incidence on the same cannot be established and therefore the

duty drawback claims forwarded for the year 1st April 2003 to 30th September

2003 and 1st October 2003 to 31st March 2004 were inadmissible. It was in the

above circumstances that the present petition has been filed.

10. On 8th November 2006 while directing notice to issue to the Respondents

an interim order was passed restraining the Respondents from taking steps to

recover the amount demonstrated in the aforementioned letters.

11. In the counter affidavit filed by the Respondents, while it is not denied

that the Petitioner is an EOU and an exporter of sesame seeds and that the

Petitioner procured its raw material from the DTA suppliers it is pointed out

that the Petitioner had been claiming duty drawback by producing disclaimers

from the DTA suppliers. The Petitioner had not provided proof of incidence

of duty suffered on the said goods procured from the DTA suppliers and "had

been representing all the while that as the raw material supplied by the DTA

suppliers was imported by it, the goods must have suffered customs duty as

shown in the customs tariff." It is stated that the brand rates of duty drawback

on the Petitioner‟s application were fixed and the amounts were disbursed to

the Petitioner because the Petitioner had throughout represented that the raw

material procured by it from the DTA supplier had been itself imported by the

suppliers and the duties must have been paid on the same. A declaration was

also furnished by the petitioner to this effect on 27 th October 2004. Further at

the time of disbursement the Petitioner had undertaken to indemnify the

Respondents in case excess payment of export duty drawback was made to it.

It appears that on 18th March 2005 the NSEZ had written to the DGFT

expressing difficulty in fixing the brand rate and asked it to suggest a modus

operandi to fix it for sesame seeds. In its letter dated 5 th August 2005 the

DGFT informed the NSEZ that since the goods supplied by the DTA to the

Petitioner had not been manufactured in India the same could not be

considered as „deemed exports‟ and therefore a clarification was sought from

the Department of Commerce. The latter by its letter dated 14 th October 2005

informed the NSEZ that since the Petitioner had not filed any proof of product

having been imported no claim of drawback was permissible.

12. Meanwhile the Respondents detected several discrepancies and falsehood

in the claims made by the Petitioner. It came to light that many of the DTA

suppliers had not been paid for their goods by the Petitioner and were

approaching the NSEZ for redressing their grievance. The bank statement

submitted by the Petitioner as proof of payment of suppliers was not in the

statutory format which required the form to be endorsed by the supplier‟s

banker whereas the Petitioner‟s form had been endorsed by its own banker.

No response had been received from the Petitioner‟s banker SBI for the

clarification sought. Along with the counter affidavit the Respondents

enclosed letters dated 3rd January 2007 and affidavits dated 31st January 2007

issued by M/s. Amee Traders and M/s. Chandarana & Brothers both of Rajkot

stating inter alia that they had not prepared the disclaimer certificates

produced by the Petitioner although the signatures shown therein was similar

to theirs. It was stated that since the sesame seeds were purchased from the

local mandi it was not possible to provide any customs duty documents. The

Respondents have with the counter affidavit also enclosed a letter dated 3rd

January 2007 of the Agricultural Produce Market Committee (APMC), Rajkot

has been enclosed stating that to the best of its knowledge "there is no import

of sesame seeds into the State of Gujarat as the State has abundant product of

sesame seeds locally grown."

13. In the rejoinder affidavit of the petitioner it is inter alia sought to be

contended that a criminal case filed by M/s. Amee Traders against the

Petitioner was settled by them in the court of the Judicial Magistrate at

Rajkot. Further both M/s. Chandarana Brothers and M/s. Amee Traders are

owned by one and the same person. It is alleged that the affidavits and

documents have been procured from him by Respondents 3 and 4 "by

exercise of undue influence or misrepresentation in order to justify their

illegal actions." Several factors are pointed out to demonstrate that the said

affidavits are per se false and contrary to the factual position. It is then

pointed out that when brand rate drawback could be fixed for HSD by relying

on the invoice value of the goods supplied and the cess chargeable, there was

no difficulty in fixing the brand rate for the sesame seeds which can be

considered as „deemed export.‟ It is stated that in view of the payments

already received by the Petitioner, its banker SBI had assessed the

commercial and fiscal viability of the Petitioner, had sanctioned loans and

disbursed funds. The SBI had a lien on the duty drawback claims payable to

the Petitioner. A onetime settlement had been entered into by the Stressed

Assets Stabilization Fund („SASF‟) of Industrial Development Bank of India

(„IDBI‟) with the unequivocal confirmation of the Respondents duly

reconfirmed by the SBI. As per the said settlement, duty drawback claims

amounting to Rs.11.459 crores were to be shared in the ratio of 60:40 per cent

between SASF and the Petitioner. Accordingly it was pleaded that on the

principles of promissory estoppel the Respondents should not be permitted to

resile from the earlier action of granting the Petitioner the deemed export duty

drawback and demand its refund more than two years later.

14. By a second additional affidavit dated 29th October 2007 the Respondents

have placed the statements of two other DTA suppliers named by the

Petitioner. Both of them categorically stated that sesame seeds supplied to the

Petitioner were local produce of the State of Gujarat.

15. In the meanwhile the Petitioner filed an application CM No. 15635 of

2007 seeking to implead the SBI and the SASF and for directions to restrain

them from initiating action for recovery of the dues owing to them by the

Petitioner. By an order dated 16th February 2008 the SBI and the SASF were

impleaded as parties. By the same order they were restrained from taking

further action in respect of the property at House No.28 Sector 9A,

Chandigarh and also from taking any action to recover the amounts due. The

Petitioner was also directed to maintain status quo as regards the title in the

properties.

16. Detailed written submissions have been filed by the Petitioner. The

submissions of Mr. Arjun Mitra, learned counsel for the Petitioner and Mr.

S.K. Dubey, learned counsel for the Respondent Union of India have been

heard at great length.

17. Apart from reiterating the submissions already noted hereinbefore, the

learned counsel for the Petitioner submitted that as long as the EOU purchases

goods from the DTA suppliers and carries out the manufacturing activity as

defined under Clause 9.3 of the Exim Policy and thereafter proceeds to export

the finished goods, the sesame seeds so exported are entitled for the claim of

deemed export duty drawback. Since the concept of duty export promotion is

structured on a deeming event where there is no requirement of any actual

incidence of duty having been suffered, there is no requirement for the DTA

suppliers to actually import the goods. According to the learned counsel for

the Petitioner the rationale for the deeming construction is to place the EOU

at par with international competitors for the same and similar item or product

so that it is given import price parity with such foreign goods. Reliance is

placed on the letter dated 29th July 2004 written by the NSEZ to the Joint

Secretary, Ministry of Commerce and Industry supporting the stand of the

Petitioner that "even if the sesame seeds is not imported the price on which

they have effected purchases are based on the import price parity and includes

all duties such as customs duty etc." therefore "the presumption can be drawn

that sesame seeds (being oilseeds) supplied to the applicants would have

import price parity. Therefore customs duty as applicable under custom tariff

could be allowed through duty drawback." As regards affidavits of DTA

suppliers which have been placed on record by the Respondents it is stated

that these are false and have been procured by the Respondents. It is

submitted that the sole purpose of disclaimer is to ensure that the drawback

benefit is not claimed twice and it is nowhere suggested that apart from the

Petitioner any one else has availed of the deemed export duty drawback.

Learned counsel for the Petitioner points out that the only issue which

required a decision making process on the part of the DGFT under the Exim

Policy was whether AIR would be applicable. The DGFT had itself

suggested to the Department of Commerce & Industry that the suppliers of the

sesame seeds by the DTA suppliers to EOU "can be recorded as deemed

export benefits as per the definition of deemed exports given in para 8.2 of the

policy. In that case the deemed export benefit („DBK‟) shall be admissible in

terms of para 8.3 of the Policy and the same can also be claimed by the EOU

on the basis of disclaimers from the DTA suppliers in terms of para 6.11 of

the Policy. Further, if no AI Rate exists on the product namely sesame seeds,

the Development Commissioner, NSEZ can fix up a brand rate for refund of

all applicable duties (customs/excise), levies, cess etc., as admissible under

the DBK Rules." It is submitted that the attempt by the Respondents to apply

the foreign trade policy (FTP) which was applicable only prospectively, and

to deny the benefit of deemed export duty drawback to which the Petitioner

was legitimately entitled, was unjust and arbitrary. Learned counsel for the

Petitioner placed reliance upon the decision of this Court in Agri Trade India

Services Pvt. Ltd. v. Union of India 132 (2006) DLT 500.

18. Appearing for the Respondents, Mr. S.K. Dubey pointed out that the

Petitioner has been changing its stand from time to time. The Exim Policy had

to be read and interpreted consistent with the concept of "drawback" as

understood under the Excise and Customs Law. The deeming fiction of an

export or import cannot be permitted to go beyond the original concept itself

under the relevant statutes. Relying on the definition of „drawback‟ as given

in P. Ramanatha Aiyar's The Law Lexicon Second Edition (1999 reprint p.

594) he pointed out that drawback implies that a commodity in respect of

which it is granted, has in fact suffered the incidence of duty. If it is locally

manufactured it should have suffered excise duty and if imported it should

have suffered customs duty. In this connection he also places reliance upon

the judgment in State of UP v. Delhi Cloth Mills (1991) 1 SCC 454. It is

submitted that sesame seeds being a marketable produce procured locally may

not possibly have suffered excise duty. Since affidavits of the very traders

from whom the Petitioner is stated to have procured the sesame seeds have

confirmed that these were not imported, there was no question of the sesame

seeds having suffered customs duty. He also refers that at no point in time the

Petitioner could satisfy the Respondents that the sesame seeds in question

suffered any incidence of duty and since this was the basic requirement, there

was no question of the Petitioner being permitted deemed export duty

drawback.

19. Given the scope of judicial review by this Court in exercise of its

jurisdiction under Article 226 of the Constitution, the issue that arises for

consideration is whether the action of the Respondents in seeking to withdraw

the benefit of deemed export duty drawback granted to the Petitioner and

demand its refund was just, fair and reasonable. The decision of the

Respondents should have been based on some relevant material based on

which it decided to withdraw the benefit of deemed export duty drawback

granted to the Petitioner. The incidental question would be whether the

decision to withdraw the benefit was preceded by sufficient compliance with

the principles of natural justice. In other words, was the petitioner given

sufficient opportunity to put forth its version which was then considered.

20. Much argument has been advanced on the applicability of the relevant

clauses of the Exim Policy. The relevant portion of Clause 6.12(a) of the

Exim Policy, on which considerable reliance has been placed, reads as under:

"Supplies from the DTA to EOU/EHTP/STP units will be regarded as "deemed exports" and the DTA supplier shall be eligible for the relevant entitlements under chapter 8 of the Policy besides discharge of EP if any, on the supplier. Notwithstanding the above, EOU/EHTP/STP units shall, on production of a suitable disclaimer from the DTA supplier, be eligible for obtaining the entitlements specified in chapter 8 of the Policy. For the purpose of claiming deemed export duty drawback, they shall get Brand Rates fixed by the DGFT wherever All Industry Rates of Drawback are not available. In addition the EOU/EHTP/STP units shall be entitled to the following....."

Clause 8.2(b) of the Exim Policy provides that the following categories of

supplies of goods by the main/sub-contractors shall be regarded as "deemed

exports" provided the goods are manufactured in India:

"(b) Supply of goods to Export Oriented Units (EOUs) or Software Technology Parks (STPs) or Electronic Hardware Technology Parks (EHTPs) or Bio Technology Parks (BTP)"

21. The clauses require that an EOU, for the purposes of claiming deemed

export duty drawback, should produce "a suitable disclaimer from the DTA

supplier". The very basis for the claim is the disclaimer certificate. There are

enough documents produced by the Respondents in the instant case to show

that the very traders in the DTA from whom the Petitioner claims to have

procured the sesame seeds have stated that such stock was not imported. The

letter of the APMC, Rajkot as well as of these traders indicate that sesame

seeds are grown in abundance locally. There was no occasion to import

sesame seeds at all. This is at complete variance with the Petitioner‟s stand

that the goods were imported.

22. At the time of disbursement of the claim, on 27th October 2004, the

Petitioner gave the following declaration:

"DECLARATION

We, Sesame Foods Private Limited, 807, Ansal Bhawan, 16, Kasturba Gandhi Marg, New Delhi-110001 confirm that:

1. We have received the confirmation for prices charged by the DTA suppliers for Sesame seeds as per their letter dated 5th and 9th July (copy enclosed.)

2. The suppliers have confirmed that the incidence of all levies, Customs duties, Cess etc. as applicable at the time of purchase have been duly considered in the prices charged by them. Only the local taxes as applicable are reflected separately in the invoices.

3. We hereby confirm that to the best of our knowledge and belief the prices charged by the DTA suppliers in the invoices raised to us have been arrived at after including the incidence of all levies, Customs duties, Cess etc." (emphasis supplied)

23. There can be no manner of doubt that the petitioner was leading the

Respondents to believe that the DTA suppliers had imported sesame seeds

and had paid customs duties which had thereafter been built into their price.

The petitioner stuck to this stand even in its letter dated 9th November 2005

where it claimed that the country does not produce sufficient indigenous

goods and depends surely on imports thereby suggesting that the sesame

seeds in respect of which the drawback was claimed was imported. Then we

have the Petitioner‟s letter dated 21st April 2006 to the Ministry of Commerce

& Industry where it was stated that "we are prepared to furnish the proof of

duty suffered on the imported Sesame seeds for the relevant periods of the

claim and to the entire satisfaction of the department."

24. Clearly the above stand of the petitioner has been demonstrated to be

untenable by the subsequent letters of the APMC Rajkot and of the DTA

suppliers themselves. Although it was submitted that the decision to withdraw

the benefit was not per se based on these letters, which came later, the fact

remains that the petitioner was unable to show proof of the goods having

suffered incidence of customs duty although it had undertaken to do so by its

letter dated 21st April 2006. This court is satisfied that despite the petitioner

having been provided numerous opportunities to justify its claim for deemed

export duty drawback, it failed to do so. There has, to that extent, sufficient

compliance with the principles of natural justice.

25. The second major difficulty for the petitioner is that the veracity of

disclaimer certificates produced by it for claiming deemed export duty

drawback have been shown prima facie to be doubtful. The affidavits dated

31st January 2007 of the DTA suppliers clearly show that they had not

prepared such certificates. Although the petitioner has questioned the

affidavits claiming that these were „procured‟ by the Respondents, the Court

in its writ jurisdiction has only to examine if this was relevant material

justifying the Respondents‟ decision to withdraw the benefit of drawback

granted to the petitioner. The answer to that question has to be in the

affirmative in the facts and circumstances of the case.

26. The petitioner has during the course of arguments tried to shift its stand to

urge that there was no need for the goods supplied by the DTA suppliers to be

imported at all in the first place since this was only a „deemed export‟ and the

supplies to the EOU by the DTA suppliers were accordingly „deemed

imports‟. This Court is unable to accept this submission. In the first place, the

petitioner cannot be permitted to shift its stand about the requirement of the

law to suit its convenience. If it maintained before the Respondents, and the

documents referred to show that it in fact did, that the goods in question were

imported, it has to make good that case. Clearly the Respondents were led to

believe that the goods were in fact imported. After being unable to make good

this claim despite numerous opportunities, it is not open to the petitioner to

seek to change the very basis of its claim. The Respondents admitted the

claim of the Petitioner on the basis that the sesame seeds in question were not

in fact imported. If this is factually correct then the very basis for entertaining

the claims of the Petitioners goes.

27. There is considerable merit in the submission of the Respondents about

the very concept of a duty drawback. It is posited on the goods having

suffered some incidence of indirect tax, either excise or customs duty. The

following observations of the Supreme Court in State of U.P. v. Delhi Cloth

Mills (supra) are relevant (SCC @ p. 468):

"Drawback means the repayment of duties or taxes previously charged on commodities, from which they are relieved on exportation. For example, in the customs laws of some countries an allowance is made by the Government upon the duties due on imported merchandise when the importer, instead of selling it within the country re-exports it, and then the difference of duty is refunded, if already paid."

28. The deeming fiction of an export cannot be stretched beyond the scope of

the concept of „drawback.‟ In the Interpretation of Statutes (9th Edn. 2004)

by G.P.Singh it is observed:

"In interpreting a provision creating a legal fiction, the Court is to ascertain for what purpose the fiction is created, and after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the section by which it is created. It cannot also be extended by importing another fiction. And a legal fiction in terms enacted „for purposes of this Act‟ is normally restricted to that Act and cannot be extended to cover another Act."

[See also Union of India v. Sampat Raj Dugar, AIR 1992 SC 1417, p. 1423

and Garden Silk Mills Ltd. v. Union of India, AIR 2000 SC 33]

The very concept of a „drawback‟ presupposes that it is preceded by a

transaction that has suffered some incidence of duty, either excise or customs

duty. If agricultural inputs that are in fact not imported, do not otherwise

suffer incidence of excise duty, the question of fixing an AIR for such

commodity cannot arise. The parity sought with HSD is plainly misconceived

as HSD is a non-agricultural commodity which is manufactured and otherwise

is amenable to levy of excise duties. This fundamental difference was perhaps

lost sight of when the Respondents proceeded to fix AIR for sesame seeds.

The only manner in which the petitioner could have got the benefit was to

show that the sesame seeds were in fact imported. That explains why it

repeatedly assured the Respondents that it would provide proof to this effect.

And it failed to do so.

29. In the above circumstances, there is no question of invocation of the

principle of promissory estoppel against the Respondents. There is no

estoppel against an illegality. If the Petitioner was in fact not entitled in law

to claim deemed export duty drawback they cannot prevent the Respondents

from taking corrective steps to recover the amounts wrongly released to the

Petitioner. Notwithstanding that the Petitioner may subsequently have made

arrangements with its banker and financial institutions, the illegality in

releasing the deemed export duty drawback to the Petitioner cannot be

justified or condoned.

30. There is no merit in the submission that the Respondents are trying to

apply the FTP retrospectively to the Petitioner‟s transaction and, therefore, the

impugned orders are not legally sustainable. As already noticed hereinbefore

the very factual basis to sustain the claim of the Petitioner on the basis of the

clauses in the Exim Policy, is non-existent. A very serious question mark has

been put on the disclaimer certificates produced by the Petitioner. The

Petitioner has been unable to show that the disclaimer certificates which they

have produced are in fact reliable and genuine documents. After claiming that

the sesame seeds in question were imported, the petitioner has been unable to

make good that claim.

31. After the arguments concluded, Mr. Sanjay Jain, learned Senior counsel

appeared on behalf of the Petitioner and submitted that the interim orders

passed by the Court earlier should be continued for some time to enable the

Petitioner to file an appeal. In the facts and circumstances of the case, this

Court declines this prayer. It was then submitted that the Petitioner‟s remedy

of filing a civil suit on the very issues agitated in this petition should be left

open and that this order should not influence those proceedings. As far as this

plea is concerned, while the Petitioner if so advised, can seek whatever

remedies are available to it by way of a civil suit, it is not possible to accept

the plea that the decision of this Court (as long it is not overturned by the

decision of a higher court) on the points put in issue before it and argued

extensively by the petitioner will not bind the petitioner.

32. In view of the above, this Court finds no legal infirmity in the impugned

decisions taken by the Respondents to withdraw the deemed export duty

drawback granted to the Petitioner. The petition is without merit and it is

dismissed as such with costs of Rs.20,000/- which will be paid by the

Petitioner to the Respondents within a period of four weeks.

33. All interim orders stand vacated. The applications are dismissed.

S. MURALIDHAR, J.

FEBRUARY 02, 2010 dn